White House warns of $165 billion deficit

WASHINGTON -- The White House said Friday that this year's federal budget will run a deficit of about $165 billion, the first time since 1997 that Washington has spent more money than it has taken in.

The return to red ink was not a surprise, but the deficit's size is larger than anticipated. Bush administration officials also warned that a balanced budget may not reappear until 2005 -- at the earliest.

"This is a fragile recovery still," said White House budget director Mitchell Daniels. He also suggested that tough spending restraints are in order.

"When we are trying very hard to get back to balance, every dollar counts," he said.

Daniels' deficit projections ignited a new round of partisan finger-pointing, capping a week of wrangling between Republicans and Democrats on an array of issues.

The White House blamed the deficit on a weak economy that it says it inherited from the Clinton administration, as well as on the war against terrorism and the "whipsaw" effect of a soaring stock market that has plummeted.

Democrats blamed Bush's 10-year, $1.35 trillion tax cut that Congress enacted last year and what they called his insufficient response to the corporate scandals now sapping investor confidence.

They also accused the White House of presenting too rosy a picture in order to shield the president from further political fallout.

The deficit projections and the political debate set the stage for Bush's scheduled speech on the economy on Monday in Birmingham, Ala. The president will be "sharing with the public some of his thoughts about the strength of the economy and some of the underlying factors and fundamental strengths that are found in the economy," said White House press secretary Ari Fleischer.

Earlier this year, the Congressional Budget Office had projected a deficit of about $100 billion.

If the latest projection proves accurate for the fiscal year that ends Sept. 30, the government would record it's largest deficit since 1994. In 1998, the government recorded its first surplus ($69.2 billion) since 1969.

For the 2001 fiscal year, the surplus of $127 billion was no surprise. The largest deficit ever was $290.4 billion, recorded in 1992.